Virginia: Political realities of ABC privatization

The decision last week by Gov. Bob McDonnell to call off the special session on government reform was a sensible and pragmatic response to the political realities of ABC privatization. However, it does not mean that efforts to privatize ABC stores will not continue – because this idea of government getting out of the commercial liquor business makes sense, and it will happen at some point in the near future.

The problem with ABC privatization is not the concept, which is supported by a wide margin of Virginia residents. The challenge is coming up with the money to replace the current system, which places an average effective tax rate on distilled spirits of 94 percent. The way the current system works is that a 20 percent excise tax is placed on all alcohol products at the wholesale level. But because the state controls the retail distribution, this gives state officials the ability to mark up the product seemingly without limitation.